In a just-released stage demo of Milo, Molyneux shows how the Milo project — which requires this fall's Kinect sensor array for the Xbox 360 — has developed. If this pans out, it'll be hard to hate.

Milo had seemed like a know-it-all brat, Molyneux explains. Using the Kinect sensor he could see you, sort of hear you and tell you things. But what he needed, Molyneux says in a just-released video of the designer showing the game at a TED conference, is a problem. Now Milo has one. He's a British boy who has moved to the U.S. His parents are too busy to help him with his problems, so he conjures you as an imaginary friend.

Watch the video and witness how more of a game-like points system has been added to Milo. And note, as I'm sure you will, all the talk about how Milo will adapt to player input. ""We are changing the mind of Milo constantly," Molyneux said. "That means no two people's Milos can be the same."

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One example Molyneux showed, was that the Milo user/player will decide whether Milo smashes a snail under his foot.

The most ambitious element of Milo will be that the simulated boy will be connected to a Microsoft data network, enabling the simulation to be more complex. Says Molyneux: "His mind is based in the cloud. As millions of people use it he'll get smarter and more clever. He'll recognize more objects and understand more words."

The Milo project will use Microsoft's TellMe speech-recognition service to allow users to use natural language to talk to Milo. Even Molyneux acknowledged that voice recognition technologies have a poor history, so let's remain skeptical about that.

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The game/program will use a body-recognition program to detect how a player positions their body. As an example, Molyneux suggested that Milo will match a seated/leaned-in posture of the user. (It must be noted that this Kinect program, which seemed to be keyed to upper-body and arm movement, was played on stage at TED while the user was sitting down — a Kinect first for a public demo that may signal Microsoft is overcoming its Kinect-couch incompatibility issues.)